House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 2 - Liability for the luxury car tax

Overview

2.1 This Chapter deals with the provisions found in Part 2 of the A New Tax System (Luxury Car Tax) Bill 1999 (LCT Bill) and sets out when you make a taxable supply or taxable importation of a luxury car. It also describes how to work out the amount of luxury car tax on those supplies and when you are entitled to quote in respect of a supply.

2.2 You must pay luxury car tax if you make a taxable supply of a luxury car. [Section 5-5] You must also pay luxury car tax if you make a taxable importation of a luxury car. [Section 7-5] The provisions dealing with taxable supplies of luxury cars are found in Division 5 and the provisions dealing with taxable importations are found in Division 7 .

2.3 When you quote in respect of a supply of a luxury car, no luxury car tax is payable for that supply. This system of quoting is designed to prevent luxury car tax becoming payable until the car is sold or imported at the retail level. The provisions that deal with quoting are found in Division 9 .

Taxable supplies of luxury cars

2.4 If you satisfy the conditions in subsection 5-10(1 ), then you have made a taxable supply of a luxury car and must pay the amount of luxury car tax determined under section 5-15 . However, certain supplies of luxury cars are not taxable supplies of luxury cars and as such, will not attract the tax. For example, a supply of a luxury car that is more than 2years old is not a taxable supply of a luxury car and will not attract the tax.

2.5 Generally speaking, the supply of cars that are manufactured from cars that are over 2 years old are not taxable supplies of luxury cars (for example, the combination of two existing cars to form a new car).

2.6 The rules about taxable supplies of luxury cars are explained in paragraphs 2.7 to 2.42 of this explanatory memorandum. The rules to determine the amount of luxury car tax payable are explained in paragraphs 2.43 to 2.68.

What is a taxable supply of a luxury car?

2.7 You make a taxable supply of a luxury car if you satisfy all of the following conditions:

•

you supply a luxury car;

•

the supply is made in the course or furtherance of an enterprise that you carry on;

•

the supply is connected with Australia; and

•

you are registered, or required to be registered.

[Subsection 5-10(1)]

2.8 These concepts are explained in more detail immediately below. However, subsection 5-10(2) provides some exceptions to these concepts, so you must also refer to these to determine whether or not you will be liable to pay the luxury car tax (refer to paragraph 2.25 to 2.42 for further information on these exemptions).

What is a luxury car?

2.9 A luxury car is defined in terms of whether the value of the car exceeds the luxury car tax threshold. [Subsection 25-1(1)] If it does, and is not specifically excluded from the definition, then it is a luxury car. If it does not, or if the car is specifically excluded from the definition, then it is not a luxury car and will not be subject to the luxury car tax.

2.10 The term car is defined in the Dictionary and means a motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 2 tonnes and fewer than 9 passengers. A motor vehicle is defined to mean a motor-powered road vehicle (including a 4-wheel drive vehicle). Therefore, the definition of car includes all passenger cars including station wagons, all 4-wheel drives, light trucks, motor homes, campervans and hearses.

2.11 The luxury car tax threshold is the car depreciation limit that applies under Subdivision 42-B of the Income Tax Assessment Act 1997 (ITAA 1997) for the year in which the supply of the car occurred. [Subsection 25-1(3)] Refer to paragraphs 2.62 to 2.63 for more information on the luxury car tax threshold.

What is not a luxury car?

2.12 Certain vehicles are specifically excluded from the definition of luxury car, ie. prescribed emergency vehicles and certain vehicles used for transporting disabled people. However, note that the exemption does not extend to all vehicles used by a particular class mentioned in the exemption, only the specific cars themselves. Also note that these exemptions are in addition to a supply excluded from a taxable supply of luxury cars that are found in subsection 5-10(2) .

Emergency vehicles

2.13 A vehicle, or class of vehicle, that is specified in the regulations to be an emergency vehicle , is not a luxury car. It is intended that this would cover vehicles such as ambulances. [Paragraph 25-1(2)(a)]

2.14 Therefore, the regulations will prescribe what vehicle or class of vehicle will be an emergency vehicle and the supply of such a vehicle, regardless of whether or not it exceeds the luxury car tax threshold, will not attract luxury car tax.

Certain vehicles fitted out to transport disabled people seated in wheelchairs

2.15 Cars that are specially fitted out for transporting disabled people seated in wheelchairs are excluded from the definition of luxury car, and are not subject to luxury car tax. [Paragraph 25-1(2)(b)] The definition of disabled person is defined in the Dictionary to mean a disabled veteran (as described in paragraphs 38-505(1)(a) and (b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) or a person with a disability certificate (as described in paragraph 38-510(1)(a) of the GST Act).

2.16 However, according to paragraph 25-1(2)(b) , if the supply of the car is goods and services tax (GST) free under Subdivision 38-N of the GST Act, then the car is a luxury car if its value is greater than the luxury car tax threshold, and would be subject to luxury car tax. The policy is intended to replicate the treatment given to vehicles under WST whereby motor vehicles that are specially fitted out for transporting disabled persons seated in wheelchairs are excluded from the 45 % WST rate unless it is exempt because it is for an eligible disabled person (refer to Item 1(2) of Schedule 6 of the Sales Tax (Exemptions & Classifications) Act 1992 (ST(E & C) Act 1992).

2.17 Therefore, a vehicle that exceeds the luxury car tax limit can either be supplied GST - free or luxury car tax free, but not both.

You supply a luxury car

2.18 The concept of supplying a luxury car is intended to be broad and is based on the similar concept of taxable supply found in the GST Act. Accordingly, a supply is any form of supply whatsoever and includes retail and wholesale sales. The following are some examples of a supply of a luxury car:

•

A car dealer sells a car to an individual or business. Usually in this case, title of the car passes from the manufacturer to the finance company to the dealership to the end customer at the time of sale. Each stage of this transaction would be a separate supply of a car.

•

An entity provides a luxury car to an employee either as a bonus or as part of a salary package.

•

The sale of a car to a Commonwealth or State or Territory department or agency or statutory authority.

The supply is made in the course or furtherance of an enterprise that you carry on

2.19 The term in the course or furtherance is not defined in the LCT Bill, but is broad enough to cover any supplies made in connection with your enterprise. An act done for the purpose or object of furthering an enterprise, or achieving its goals, is a furtherance of an enterprise although it may not always be in the course of that enterprise (see for example the New Zealand Case N43 (1991)
13 NZTC 3361 ). The term is also used in the GST Act (refer to subsection 9-5(b) of the GST Act). [Paragraph 5-10(1)(b)]

2.20 The term in the course or furtherance does not extend to the supply of private commodities, such as when a car dealer sells his or her own private car. However, it would cover a sale of a car by a car dealership in the ordinary course of carrying on that dealership and may also extend to a sale of a car by a sole trader who is registered for GST purposes, but only if the sale is in the course or furtherance of the sole traders enterprise.

2.21 The term carrying on an enterprise is defined in the Dictionary to include doing anything in the course of the commencement or termination of the enterprise. The term enterprise refers to the same term as used in the GST Act and is intended to be as wide as possible.

The supply is connected with Australia

2.22 The term connected with Australia is defined in the Dictionary as having the meaning given by section 9-25 of the GST Act. Generally, it is intended to cover all supplies of luxury cars that are:

•

delivered or made available in Australia to the recipient of the supply;

•

removed from Australia; or

•

brought to Australia (including luxury cars that are assembled in Australia).

[Paragraph 5-10(1)(c)]

You are registered, or required to be registered

2.23 In order to make the administration of the luxury car tax simpler, you will not be required to separately register for both GST and luxury car tax. If you are registered or required to be registered under the GST Act, then you may be liable to pay luxury car tax if you make a taxable supply or importation of a luxury car. [Paragraph 5-10(1)(d)]

2.24 Since the rules that apply to registration under the GST Act will also apply for luxury car tax some of the key rules have been provided in this explanatory memorandum, however, you should examine the GST Act to determine if you are required to be registered. For further information on registration, refer to paragraph 4.9 in Chapter 4.

What is not a taxable supply of a luxury car?

2.25 Not all supplies of cars are subject to luxury car tax. The LCT Bill provides a few circumstances where a supply of a car is not a taxable supply of a luxury car, and therefore not subject to luxury car tax. The main circumstance where a supply is not a taxable supply is where a person quotes for the supply of the car. This is a special feature of the luxury car tax that allows registered entities to delay the incidence of tax until the retail sale.

2.26 In particular, the LCT Bill provides that you do not make a taxable supply of a luxury car if:

•

the recipient quotes for the supply of the car;

•

the car is more than 2 years old; or

•

you export the car in circumstances where the export is GST - free under Subdivision 38-D of the GST Act.

[Subsection 5-10(2)]

2.27 Further explanation of these terms is now given.

The recipient quotes in respect of the supply

2.28 In certain circumstances you can quote your Australian Business Number (ABN) for a supply or importation of a luxury car and not pay the luxury car tax.

2.29 The provisions that deal with quoting are found in Part 2, Division 9 . Under this Division, you do not make a taxable supply of a luxury car if the recipient quotes for the supply of the car. [Paragraph 5-10(2)(a)] You are only entitled to quote if you are registered [subsection9-5(2)] and if you intend to use the car one of the following purposes, and for no other purpose:

•

you hold the car for trading stock, other than holding it for hire or lease;

•

you carry out research and development for the manufacturer of the car; or

•

you export the car in circumstances where the export is GST - free under Subdivision 38-D of the GST Act.

2.30 The LCT Bill provides specific rules that deal with quoting. For example, periodic quoting; the manner in which quote must be made; and incorrect quoting. These matters are dealt with at the end of this Chapter in paragraphs 2.84 to 2.93.

[Subsection 9-5(1)]

You hold the car as trading stock

2.31 As mentioned previously, the LCT Bill provides that if you are registered for GST and quote your ABN because you intend to hold the car as trading stock, then the supply of the car to you is not a taxable supply of a luxury car, and you are not liable for luxury car tax in relation to that supply.

2.32 If you hold a car for hire or lease, then you are not entitled to quote in respect of that car. The supply to you is a taxable supply and will attract luxury car tax.

You carry out research and development for the manufacturer of the car

2.33 Paragraph 9-5(1)(b) of the LCT Bill allows a manufacturer to supply a car to an external entity in order for that entity to conduct research and development activities on behalf of the manufacturer when the entity carrying out the research and development has quoted.

2.34 Research and Development is defined in the Dictionary to mean:

systematic, investigative and experimental activities that involve innovation or high levels of technical risk and are carried on for the purpose of:

•

acquiring new knowledge (whether or not that knowledge will have a specific practical application); or

•

creating new or improved materials, products, devices or processes.

2.35 The policy intention is to apply equal treatment to those manufacturers who contract out their research and development activities and those manufacturers who choose to conduct these activities themselves.

You export the car and the export is GST - free

2.36 The third circumstance in which you can quote is where you intend to export the car, and the export is GST free under Subdivision 38-D of the GST Act. [Paragraph 9-5(1)(c)] Further information on exporting is found in paragraphs 2.40 to 2.42 of this explanatory memorandum.

The car is more than 2 years old

2.37 You are not liable to pay luxury car tax if you supply a car that is more than 2years old at the time of the supply. [Paragraph 5-10(2)(b)] This provision works in conjunction with the rule that allows previously paid luxury car tax to be credited against amounts of luxury car tax (see paragraphs 2.65 to 2.68) and prevents the luxury car tax becoming payable indefinitely on supplies of luxury cars. However, different rules apply to determine if a car is more than 2years old for the purposes of this Bill, depending on whether the car was imported or not.

2.38 If a car has not been, (and has never been), imported into Australia, then paragraph 5-10(3)(a) operates so that the car is not subject to luxury car tax if it is manufactured more than 2 years before the time of the supply. For example, a car manufactured in Australia in January 2001 and supplied in February 2003 will be more than 2 years old at the time of supply and is not subject to the luxury car tax. You will also need to refer to transitional arrangements that apply to sales of cars that were subject to a retail sale before 1 July 2000 in the A New Tax System (Wine Equalisation Tax and Luxury Car Tax Transition) Act 1999 .

2.39 If a car has been imported into Australia, then paragraph 5-10(3)(b) operates so that the car is not subject to luxury car tax if more than 2 years have lapsed since the time of importation

You export the car in circumstances where the export is GST - free

2.40 The Governments policy is that GST is a tax on consumption in Australia and generally, things that are not for consumption in Australia, such as exports, are GST - free. Similarly, a supply of a luxury car that is exported is not for consumption in Australia and is generally not a taxable supply of a luxury car, and hence not subject to luxury car tax.

2.41 Paragraph 5-10(2)(c) of the LCT Bill provides that if you export a car in circumstances where the export is GST - free under Subdivision 38-D of the GST Act, then the supply of that car to you is not a taxable supply of a luxury car.

2.42 You will need to refer to Subdivision 38-D of the GST Act to determine whether or not the supply is GST - free. Some key rules about exports are as follows:

•

A supply of goods is GST - free if you export the goods within 60 days after the earlier of the:

•

day you receive any of the consideration; or

•

day you provide an invoice.

•

A supply of goods is GST - free if the consideration for the export is provided in instalments under a contract which requires the goods to be exported and you export the goods within 60 days after the earlier of the:

•

final instalment of the consideration; or

•

day you provide an invoice for the final instalment.

The amount of luxury car tax payable

Overview

2.43 Generally speaking, the amount of luxury car tax payable on a taxable supply of a luxury car is:

•

the amount determined using the formula (see paragraph 2.47)

minus

•

any amounts of luxury car tax that have been payable in respect of any previous importation or supply of that car, taking into account any adjustments made (see paragraphs 2.65 to 2.68).

2.44 The formula calculates the difference between the value of the luxury car and the luxury car tax threshold (refer to paragraphs 2.47 to 2.64). Since the luxury car tax value (generally, the price paid for the car) is GST inclusive, the formula then operates to take this out before applying the luxury car tax rate of 25% to the difference that exceeds the threshold.

2.45 The next step is to determine whether there have been any amounts of luxury car tax paid on any previous supply or importation of that car (refer to paragraphs 2.65 to 2.68). If there has, then this reduces the amount of luxury car tax payable determined under the formula.

2.46 A more detailed explanation of these calculations now follows.

The formula

2.47 The amount of luxury car tax payable on a taxable supply of a luxury car is calculated using the formula in subsection 5-15(1) . This formula is:

25/100*10/11*[Luxury car tax value - Luxury car tax threshold]


Luxury car tax value

2.48 The luxury car tax value of a supply of a car is the price of the car excluding:

•

any luxury car tax payable on the supply; and

•

any other Australian tax, other than GST and customs duty, payable on the supply.

[Section 5-20]

2.49 The term price is further defined in the Dictionary as having the meaning given by section 9-75 of the GST Act, which states:

price is the sum of:

•

so far as the consideration for the supply is consideration expressed as an amount of moneythe amount (without any discount for the amount of GST (if any) payable on the supply); and

•

so far as the consideration is not consideration expressed as an amount of moneythe GST inclusive market value of that consideration.

2.50 Price is generally the amount of money paid for the car, however, this is not always the case. Therefore, if the consideration for the supply is not in money, or not only in money, the price is determined according to the above rules.

Important note : At the time of writing this explanatory memorandum, the GST Act, as currently drafted, may have the effect of including luxury car tax in the luxury car tax value. This is clearly not the Governments intention and as such, section 9-75 of the GST Act will be amended to ensure that price excludes amounts of luxury car tax.

2.51 Paragraph 5-20(1)(a) provides that the price of the supply excludes any amounts of luxury car tax included in that supply (note that previous luxury car tax amounts are taken into account under subsection 5-15(2) ). The price also excludes any other Australian tax (including motor vehicle registration and third-party insurance), other than customs duty and GST. [Paragraph 5-20(1)(b)]

Some special rules about luxury car tax value

2.52 The LCT Bill provides special provisions that may impact on the luxury car tax value. These matters are listed below, and a brief explanation on each is given.

•

A supply of a car to an associate etc.

•

Additional supplies and modifications for cars

•

Modifications for disabled people

•

Agreements with the Commissioner of Taxation

A supply of a car to an associate etc.

2.53 The luxury car tax value of a car is the GST inclusive market value of the car, excluding any luxury car tax payable on the supply, if you:

•

supply a luxury car to your associate, or your employee, or an officer of either your associate or of you; and

•

you do not receive any consideration for the supply or if the consideration is less than the GST inclusive market value of the car.

[Subsection 5-20(2)]

2.54 The terms GST inclusive market value , associate , officer and consideration are further defined in the Dictionary .

Additional supplies and modifications for cars

2.55 Subsection 5-20(3) provides that, in certain circumstances, the luxury car tax value of a car includes the price of all supplies and modifications in relation to that car. This feature is designed to prevent additional supplies and/or modifications being made to a car after the point of sale and excluded from luxury car tax.

2.56 Subsection 5-20(3) will apply to you if you supply a luxury car and you, or your associate, provide additional supplies and/or modifications to that car, or that are paid for by the recipient, that are:

•

made before the end supply of the car; or

•

made under an arrangement made with you or your associate, at or before the time of the end supply of the car.

2.57 For example, if a person buys a car from a car dealer who arranges for modifications and/or additional supplies to be made or added to that car, then the luxury car tax value of the car must include the price of those modifications and/or additional supplies. This is the case regardless of whether the modifications or additional supplies are made or added to the car, before or after the time of sale.

2.58 Subsection 5-20(4) provides that the price of the supply is the GST inclusive market value of the car where:

•

a car is supplied by an associate of the recipient, and

•

there is no consideration for the supply or the consideration is less than the GST inclusive market value of the car.

Modifications for disabled people

2.59 The luxury car tax value does not include modifications made to a car that are solely for the purpose of:

•

adapting it for driving by a disabled person; or

•

adapting it for transporting a disabled person.

[Subsection 5-20(5)]

2.60 A disabled person is defined in the Dictionary to mean a person who is a disabled veteran (as described in paragraphs 38-505(1)(a) and (b) of the GST Act) or a person with a disability certificate (as described in paragraph 38-510(1)(a) of the GST Act).

Agreements with the Commissioner of Taxation

2.61 The Commissioner of Taxation may enter into an agreement with you about calculating the luxury car tax values of particular supplies or importations of luxury cars. So far as the agreement is inconsistent with the LCT Bill, the agreement prevails. [Section 21-10]

Luxury car tax threshold

2.62 The next step of the formula is to subtract the luxury car tax threshold from the luxury car tax value.

2.63 The luxury car tax threshold is GST inclusive and is the car depreciation limit that applies under Subdivision 42-B of the ITAA 1997 for the year in which the supply of the car occurred. [Subsection 25-1(3)] The car depreciation limit for the 1998-99 financial year is $55,134.

Using the formula to determine luxury car tax payable

2.64 The rate of luxury car tax of 25% is applied to the difference between the luxury car tax value and the luxury car tax threshold under subsection 5-15(1) . However, since the luxury car tax value is the price of the car inclusive of GST, and the luxury car tax threshold is a GST inclusive amount, the GST has to be removed before then applying the luxury car tax rate of 25% to the balance. The formula does this by applying the fraction 10/11 to the difference.

Example:

Peter buys a car from Pauls CarMart, with a GST inclusive price of $88,000. This price includes GST payable on the supply, but excludes the luxury car tax on the supply. The luxury car tax value determined under section 5-20 is therefore $88,000. Assume that the luxury car tax threshold is $55,134, and there are no other charges connected with the supply.

The amount of luxury car tax payable is determined using the following steps:

Step 1. Calculate the amount to be subject to luxury car tax

[luxury car tax - luxury car tax threshold] =[$88,000-$55,134] =[$32,866]


Step 2. Since the amount calculated above ($32,866) includes GST, the next step is to multiply by 10/11 to take this out

=10/11*[$32,866] =$29,878


Step 3. The effect of step 2 is that the luxury car tax applies to $29,878 rather than $32, 866. That is, you do not pay luxury car tax on the difference of $2,988. The amount that is left is then multiplied by the luxury car tax rate of 25%.

25/100*[$29,878] =$7,469.50


The total amount that Peter has to pay Paul for the car is:

$88,000(including GST)+$7,469.50(luxury car tax) =$95,469.50


Previous importation or supply of a luxury car

2.65 The amount of luxury car tax payable on a taxable supply of a luxury car is reduced by the sum of all luxury car tax that was payable in respect of any previous importation or supply of the car. [Subsection 5-15(2)] The effect of this provision is that once luxury car tax is applied to the value of a car, it will not become payable again, unless the value of the car increases. If the value of the car does increase, and there is a further taxable supply, luxury car tax will only apply to the extent of the increase.

2.66 In some cases, the amount of luxury car tax payable on a taxable supply of a luxury car is less than the sum of all luxury car tax that was payable in respect of any previous importation or supply of the car. If this is the case, then the amount of luxury car tax payable on that supply is zero. [Subsection 5-15(2)]

2.67 For example, if a car is sold (assume a taxable supply of a luxury car) for $100,000 in February 2001, then luxury car tax is payable. If the same car is again sold (assume a taxable supply of a luxury car) in February 2002 for $80,000, then no luxury car tax will apply. The reason for this is because the luxury car tax payable on the second supply is less than the luxury car tax payable on the first.

2.68 In determining the luxury car tax that was payable in respect of any previous importation or supply of a car for the purposes of paragraph 5-15(2)(b) , you must take into account luxury car tax adjustments, if any, other than adjustments made because of bad debts. [Subsection 5-15(3)] . For more information on adjustments, please refer to paragraphs 3.17 to 3.33 in Chapter 3 of the explanatory memorandum.

Taxable Importations of luxury cars

2.69 We have just dealt with how luxury car tax will apply to a taxable supply of a luxury car. Luxury car tax will also apply if you import a luxury car into Australia. The provisions that deal with taxable importations of luxury cars are found in Division 7 of the LCT Bill.

2.70 The following paragraphs now deal with taxable importations of luxury cars. The rules regarding taxable importations of luxury cars are explained in paragraphs 2.72 to 2.80 of this explanatory memorandum. The rules to determine the amount of luxury car tax payable are explained in paragraphs 2.81 to 2.83.

2.71 An important difference between a taxable supply and a taxable importation of luxury car is that there is no registration requirement for a taxable importation, and the importer need not be carrying on an enterprise. Luxury car tax is generally payable in both of these cases.

What is a taxable importation of a luxury car?

2.72 Section 7-5 provides that you must pay the luxury car tax payable on any taxable importation of a luxury car that you make. Under subsection 7-10(1) , you make a taxable importation of a luxury car if you import the luxury car.

2.73 The term import has the same meaning as in the GST Act, so you will need to check this to determine if you import a luxury car. Generally, you make an importation of goods into Australia under Division 13 of the GST Act, if:

•

you enter the goods for home consumption (within the meaning of the Customs Act 1901); and

•

at the time they are so entered for home consumption, you are the owner (within the meaning of the Customs Act 1901) of the goods.

2.74 The importation of the car will include any car parts, accessories or attachments that you import at the same time as the car and that could reasonably be expected to be fitted to the car. [Subsection 7-10(2)] The term car parts has the same meaning as given in section 195-1 of the GST Act, and are generally essential to the operation of the car. The terms accessories and attachments are peripheral items and include such things as car stereos, air conditioning units, car alarms, spare tyres and car jacks.

What is not a taxable importation of a luxury car?

2.75 The Bill provides that you do not make a taxable importation of a luxury car in the following circumstances:

•

you quote for the importation of the car; or

•

luxury car tax has already become payable in respect of the car; or

•

the car is covered by Item 17, 18A, 18B, 18C, 21 or 24 in Schedule 4 to the Customs Tariff.

[Subsection 7-10(3)]

2.76 Further explanation of these circumstances is now given.

You quote for the importation of the car

2.77 If you are registered, you can quote in respect of an importation of a luxury car in the same circumstances as for a taxable supply of a luxury car. For example, if you are a registered dealer and import a car that you hold as trading stock, you may quote your ABN to Customs. Refer to paragraphs 2.28 to 2.36 for information on when you can quote. [Paragraph 7-10(3)(a)]

Luxury car tax has already become payable

2.78 You do not make a taxable importation of a luxury car if luxury car tax has already become payable in respect of that car. This may apply where you have paid the luxury car tax payable on a luxury car and then later export it. When you re-enter that car into Australia you are generally not required to pay luxury car tax again (assuming you have not made an adjustment or claimed back the previous luxury car tax). [Paragraph 7-10(3)(b)]

The car is covered by certain items in Schedule 4 to the Customs Tariff

2.79 Under paragraph 7-10(3)(c) and subsection 7-10(4) , a car that is covered by certain items in Schedule 4 to the Customs Tariff will not be subject to luxury car tax at the time it is imported. A summary of these items is provided in the following table:

2.80 However, note that this does not prevent these cars from becoming subject to luxury car tax, if they later satisfy the conditions of a taxable supply or are re-imported into Australia.

The amount of luxury car tax

2.81 The amount of luxury car tax payable on a taxable importation is worked out in a similar way to luxury car tax payable on a taxable supply (refer to paragraphs 2.43 to 2.64). It is determined by the formula:

25/100*10/11*[Luxury car tax value - Luxury car tax threshold]


[Section 7-15]

2.82 However, there are some important differences that you should note in respect of luxury car tax value.

Luxury car tax value

2.83 Under section 7-15 , the luxury car tax value of a car is the sum of:

•

the customs value of the car and of any car parts, accessories or attachments covered by subsection 7-10(2). Customs value is determined under Division 2 of Part VIII of the Customs Act 1901 ; [Subsection 7-15(a)] and

•

the amount paid or payable:

•

to transport the car and any parts etc. to Australia; and

•

to insure the car and any parts etc. for that transport

to the extent that the amount is not already included in the customs value; [Subsection 7-15(b)] and

•

any customs duty payable in respect of the importation of the car and of any parts etc.; [Subsection 7-15(c)] and

•

any GST payable in respect of the importation of the car and of any parts etc. (Note the effect of the formula is to remove the GST component so as not to apply luxury car tax to it). [Subsection 7-15(d)]

Special rules that deal with quoting

2.84 The circumstances in which you can quote for a supply or importation of a luxury car and not pay the luxury car tax are set out in Division 9 of the LCT Bill and are explained in paragraphs 2.28 to 2.36, and 2.77 of this explanatory memorandum. The remainder of this Chapter deals with the special rules that apply where you quote. In particular it covers:

•

periodic quoting;

•

the manner in which a quote must be made; and

•

improper and incorrect quotes.

Periodic quoting

2.85 The Bill allows you to make a periodic quote for supplies that you intend to receive from a supplier during the period covered by the periodic quote. The period must not exceed 12 months. [Subsection 9-10(1)] This is similar to a periodic quote allowed under the WST system.

2.86 If you make a periodic quote on or before the first day of the period to which the quote relates, you are to be treated as having quoted your ABN for all supplies from the supplier during that period. However, this periodic quote does not relate to supplies for which you are not entitled to quote. If you are not entitled to quote for a particular supply (for example, you intend to use a luxury car as a demonstration vehicle, rather than for trading stock) you must notify the supplier of that fact at or before the time of supply. [Subsections 9-10(2) and (3)]

2.87 If you are in breach of subsection 9-10(3) , then you are guilty of an offence. The maximum penalty under subsection 9-10(4) is 20 penalty units.

2.88 Subsection 9-10(5) provides that a periodic quote is not effective if there are grounds for believing it is improperly made (refer to paragraph 2.91 for more information.)

Manner in which a quote must be made

2.89 Subsection 9-15(1) provides that a quote (including a periodic quote) must be in the approved form. The meaning of approved form is found in section 25-5 and provides that a notice, application or other document is in the approved form if:

•

it is in the form approved in writing by the Commissioner in relation to that kind of notice, application or other document; and

•

it contains the information that the form requires, and such further information as the Commissioner requires; and

•

it is given, to the entity to which it is required to be given, in the manner (if any) that the Commissioner requires; and

•

it is, if required by this Bill to be given to the Commissioner, lodged at the place that the Commissioner requires.

2.90 Further, a quote is not effective unless it is made at or before the time of the supply or importation of the luxury car. [Subsection 9-15(2)]

Improper and incorrect quotes

2.91 If a person to whom you provide a quote have reasonable grounds for believing that:

•

you are not entitled to quote in the particular circumstances;

•

the quote is not made in the approved form; or

•

the quote is false or misleading in a material particular (either because of something stated in the quote or something left out),

then, the quote that you give to that person is not effective, and you may have to pay any luxury car tax payable. If you were entitled to quote in this case, you can later use the adjustment provisions to adjust the amount of luxury car tax that should have been paid.

[Section 9-25]

2.92 Section 9-30 provides an offence for improper quoting. The maximum penalty under this section is 20 penalty units.

2.93 If you quote in circumstances in which you are not entitled to quote, the Bill allows that quote to be effective in certain circumstances. [Section 9-20]